25 EU member states join fiscal treaty

Twenty-five of the EU’s 27 member states today agreed to join a fiscal treaty intended to enforce budget discipline and to avert a repeat of the current debt crisis.

Only the UK and the Czech Republic decided to stay outside the treaty, known as the fiscal compact, which will require countries to balance their budgets and to take action if their public deficits rise above an agreed limit.

The balanced-budget rule would be written into each country’s constitution or into its laws in a similarly binding way.

The UK had already said in December that it would not join the pact. Czech Prime Minister Petr Nečas, gave three reasons for not signing up, including the difficulty of winning approval from its parliament and president.

Herman Van Rompuy, the European Council president and chairman of the summit, said: “We have made important progress in our strategy to tie our economies closer together.”

Van Rompuy said that the fiscal compact treaty would be signed by leaders at their next summit meeting on 1 March. He said it would come into force when it has been ratified by 12 member states.

The main obstacle to an agreement was a demand by Poland to take part in eurozone summit meetings. Poland, which is planning to join the euro in the near future, was concerned that it would be excluded from meetings that would take important economic decisions.

Eurozone countries will hold summits at least twice a year.

Van Rompuy said that summits that discuss fundamental issues about the future structure of the eurozone and the implementation of the fiscal compact treaty would be open to all countries that have not yet joined the euro, provided they had ratified the treaty. “If you have the intention to join the eurozone you are involved in the fundamental rules and architecture of the eurozone,” he said.

Summits only for eurozone countries would be preceded by a meeting of all 27 member states unless there were exceptional circumstances, he said.

“With this treaty we maintain as much as possible the unity of the union taking into account that those who have a common currency have the possibility to deal with problems linked to their currency,” he said.

Nicolas Sarkozy, France’s president, denied that having different types of summit meeting was divisive. “It doesn’t mean a multi-speed Europe. It doesn’t mean that countries will be put to the side. It just means there are different levels of integration,” he said.

This was not enough for Nečas, who cited the limits on Czech participation as one of three reasons for not signing up to the pact.

“Firstly, there is the limited participation at eurozone summits,” he said. “Secondly, in our view the proposal devotes little attention to debt criteria, even though this is above all a debt crisis. Thirdly, there is the ratification procedure, which in the Czech Republic is complicated and unclear, and there is no consensus on them, including an agreement with the president.”

He added that signing the treaty would bring “no political benefit, nothing new or valuable”.

José Manuel Barroso, the president of the European Commission, said that he was happy with the fiscal compact treaty because the Commission had defended some important principles, such as ensuring that no new institutions were created and that the treaty corresponded to the EU’s existing treaties.

The fiscal compact treaty, which is an agreement between governments, will be incorporated into the EU’s treaties within five years, said the European Commission’s president, José Manuel Barroso.

Angela Merkel, Germany’s chancellor, said that the European Court of Justice would be able to enforce compliance with the fiscal compact treaty’s rules on balancing budgets. This has been an important issue for Germany, which has been the strongest advocate of the treaty, because it wants to ensure that participating countries stick to their commitments to keep deficits under control.

Sweden’s Prime Minister Fredrik Reinfeldt said that his country had been able to sign up to the deal after it was agreed that all signatories would be able to attend at least one annual eurozone meeting, as well as extraordinary meetings. He also said that Sweden had won the right not to be bound by the pact’s strict rules on fiscal discipline.